NETHERLANDS / RankWire.AI / – According to Triodos Bank, Europe’s summer heatwaves and drought conditions could potentially decrease the European Union’s economic output by approximately 1% in 2026. This decline translates to an estimated loss of around €180 billion and occurs amid a year already characterized by modest economic expansion. The European Commission had projected in May that the EU’s gross domestic product would grow by 1.1% in 2023. Consequently, the predicted weather-related damages nearly match the entire expected annual increase in economic activity for the bloc.
A significant portion of the anticipated economic impact stems from diminished labour productivity. The report indicates a productivity decline of roughly 0.6% of EU GDP, as extreme temperatures adversely influence working environments. Agriculture also faces considerable challenges, with output expected to fall between 3% and 7%. Additional costs are driven by disruptions in energy, transport, and logistics sectors, as high temperatures, drought, and reduced water levels hinder operations across multiple industries.
This economic outlook follows unprecedented heat across western Europe during June and July. Data from Copernicus indicates an average regional temperature of 21.62°C during those months, exceeding the 1991-2020 average by 2.79°C and marking the warmest June-July period ever recorded. July was also characterized by widespread dryness, with parts of France, Germany, Austria, Hungary, and the Iberian Peninsula experiencing extremely low soil moisture levels.
Workforce productivity identified as key factor in projected losses
France is expected to experience the largest national impact, with GDP growth diminished by approximately 1.4 percentage points. This reduction could result in France’s economic output contracting by about 0.6% for the full year. Italy and Spain are also among the main economies facing notable setbacks from heat and drought conditions. Meanwhile, Belgium’s impact is smaller but still significant, and the Netherlands might see a growth decline of roughly 0.8 percentage points.
Europe’s economy was already showing limited momentum at the start of summer before this latest weather-related assessment. In 2025, EU growth reached 1.5%, whereas the current forecast for 2026 stands at 1.1%. The spring outlook for the euro area projected growth of 0.9%. The combined effects of weather phenomena, such as reduced working hours, decreased agricultural output, energy shortages, and transport disruptions, can impact multiple sectors simultaneously, amplifying economic losses.
Food, energy, and transportation sectors contribute to economic strain
Already, extreme heat has visibly influenced prices and business operations across Europe. The European Central Bank found that in summer 2025, unprocessed food prices in the euro area rose by 0.4 to 0.7 percentage points after one year. Independent research focusing on Italian firms revealed that extreme heat reduced sales by about 0.8%. Days with temperatures exceeding 40°C have also caused substantial setbacks in production and worker efficiency.
The 2026 evaluation estimates the direct economic impacts of this summer’s heat and drought. The projected 1% decline in EU GDP is nearly equal to the current 1.1% annual growth forecast for the bloc. Labour productivity remains the largest contributor to the estimated losses, followed by agriculture, and disruptions in energy and transport sectors. The record-breaking heat, parched soils, and low river water levels have made extreme weather a tangible factor influencing Europe’s economic performance this year.